12 CFR 702.202 - Prompt corrective action for “undercapitalized” credit unions.
(a)Mandatory supervisory actions by credit union. A federally-insured credit union which is “undercapitalized” must -
(2)Submit net worth restoration plan. Submit a net worth restoration plan pursuant to § 702.206, provided however, that a credit union in this category having a net worth ratio of less than five percent (5%) which fails to timely submit such a plan, or which materially fails to implement an approved plan, is classified “significantly undercapitalized” pursuant to § 702.102(a)(4)(ii) above;
(3)Restrict increase in assets. Beginning the effective date of classification as “undercapitalized” or lower, not permit the credit union's assets to increase beyond its total assets (per § 702.2(j)) for the preceding quarter unless -
(A) The assets of the credit union are increasing consistent with the approved plan; and
(B) Total cash and cash equivalents; or
(C) Total loans outstanding, not to exceed the sum of total assets (per § 702.2(j)) plus the quarter-end balance of unused commitments to lend and unused lines of credit provided however that a credit union which increases a balance as permitted under paragraphs (A), (B) or (C) cannot offer rates on shares in excess of prevailing rates on shares in its relevant market area, and cannot open new branches;
(4)Restrict member business loans. Beginning the effective date of classification as “undercapitalized” or lower, not increase the total dollar amount of member business loans (defined as loans outstanding and unused commitments to lend) as of the preceding quarter-end unless it is granted an exception under 12 U.S.C. 1757a(b).
(b)“Second tier” discretionary supervisory actions by NCUA. Subject to the applicable procedures for issuing, reviewing and enforcing directives set forth in subpart L of part 747 of this chapter, the NCUA Board may, by directive, take one or more of the following actions with respect to an “undercapitalized” credit union having a net worth ratio of less than five percent (5%), or a director, officer or employee of such a credit union, if it determines that those actions are necessary to carry out the purpose of this part:
(1)Requiring prior approval for acquisitions, branching, new lines of business. Prohibit a credit union from, directly or indirectly, acquiring any interest in any business entity or financial institution, establishing or acquiring any additional branch office, or engaging in any new line of business, unless the NCUA Board has approved the credit union's net worth restoration plan, the credit union is implementing its plan, and the NCUA Board determines that the proposed action is consistent with and will further the objectives of that plan;
(3)Restricting dividends paid. Restrict the dividend rates the credit union pays on shares to the prevailing rates paid on comparable accounts and maturities in the relevant market area, as determined by the NCUA Board, except that dividend rates already declared on shares acquired before imposing a restriction under this paragraph may not be retroactively restricted;
(6)Prohibiting nonmember deposits. Prohibit the credit union from accepting all or certain nonmember deposits;
(7)Dismissing director or senior executive officer. Require the credit union to dismiss from office any director or senior executive officer, provided however, that a dismissal under this clause shall not be construed to be a formal administrative action for removal under 12 U.S.C. 1786(g);
(9)Other action to carry out prompt corrective action. Restrict or require such other action by the credit union as the NCUA Board determines will carry out the purpose of this part better than any of the actions prescribed in paragraphs (b)(1) through (8) of this section.
(c)“First tier” application of discretionary supervisory actions. An “undercapitalized” credit union having a net worth ratio of five percent (5%) or more, or which is classified “undercapitalized” by reason of failing to satisfy a risk-based net worth requirement under § 702.105 or 702.106, is subject to the discretionary supervisory actions in paragraph (b) of this section if it fails to comply with any mandatory supervisory action in paragraph (a) of this section or fails to timely implement an approved net worth restoration plan under § 702.206, including meeting its prescribed steps to increase its net worth ratio.
- 12 CFR 702.203 — Prompt Corrective Action for “significantly Undercapitalized” Credit Unions.
- 12 CFR 747.2002 — Review of Orders Imposing Discretionary Supervisory Action.
- 12 CFR 702.204 — Prompt Corrective Action for “critically Undercapitalized” Credit Unions
- 12 CFR 747.2004 — Review of Order to Dismiss a Director or Senior Executive Officer.
- 12 CFR 702.205 — Consultation With State Officials on Proposed Prompt Corrective Action.